Among the political turmoil realised by Brexit and the UK’s future relationship with Europe, the issue of money laundering seems to have been overlooked. That would be a big mistake, writes Aziz Rahman. There can be no conclusive estimates of the scale of money laundering in Europe, but we’re talking about many billions of pounds every year.
Many commentators would say that the European Union (EU) has been far from perfect when it comes to tackling the issue of money laundering, but it has at least introduced a series of money laundering directives in recent years that aim to stop the proceeds of crime from flowing into its Member States.
The most recent one, the Fifth Money Laundering Directive (5MLD), is set for implementation in 2020. Following on from the Fourth Money Laundering Directive, which ordered major changes to how businesses should take a risk-based approach to money laundering and removed automatic exemptions from due diligence, 5MLD will regulate virtual currencies, improve precautions for transactions involving high-risk countries and enhance the centralisation of bank data in Member States.
In short, it’s a further removal of weaknesses that allow money laundering to flourish.
No guarantee of protection
Membership of the EU has been no guarantee of protection against money laundering, especially as some of the EU’s smaller Member States lack either the expertise or the resources to tackle it (as has been shown in a number of financial scandals in recent years). Such problems have led to louder calls for an EU-wide organisation to see greater consistency between Member States’ identification and prevention of laundering.
Such arguments are now overshadowed by Brexit. Whether the EU’s Member States come to miss the UK’s expertise in identifying sources of illegal wealth and its movement around Europe and the rest of the world remains to be seen. What has to give cause for concern is the issue of how the UK’s investigating agencies will be able to continue to track those proceeds of crime if they cannot benefit from the sharing of intelligence that currently goes on between them and their European counterparts.
We’re obviously yet to see how this problem is resolved. It’s possible that, given time, new relationships will be forged on a country-to-country basis between the UK and EU Member States. How quickly they’re put in place and how effective an alternative to EU membership they prove to be in tackling money laundering remains to be seen.
UK’s relationship with Europol
Withdrawal from the EU would mean that the UK is no longer part of the EU’s law enforcement agency Europol. Europol’s centralised intelligence database for members, namely the Europol Information System (EIS), is arguably one of the world’s most valuable assets when it comes to sharing information across borders to tackle crime. Money laundering is most certainly a crime that crosses borders.
It seems unlikely that the UK will be able to continue to use Europol in the way that it has done to date, which has to hamper its attempts to tackle flows of laundered money. A lack of co-operation will also be to the detriment of countries who are still in the EU. They’re unlikely to be able to call on UK expertise and intelligence as part of their money laundering investigations as seamlessly as they can while the UK still resides within the EU.
The EU has been criticised over its efforts to tackle money laundering in Member States allegedly not being concerted or consistent enough, but at least Member States have an infrastructure and working relationships in place.
Cause for concern
The UK can boast tough anti-money laundering legislation. Its recent use of Unexplained Wealth Orders and Account Freexing Orders are testimony to its authorities’ willingness to tackle money laundering. Soon, it will not have those working relationships in place that EU members benefit from in their efforts to tackle money laundering.
No doubt attempts will be made to instigate replacement arrangements, but the speed with which a patchwork of anti-money laundering agreements between the UK and other countries can be established – and the value of those arrangements compared to EU membership – has to be a cause for concern for both the UK and those nations still residing within the EU.
Aziz Rahman is Senior Partner and Head of the Corporate Crime Group at Rahman Ravelli Solicitors